By Ashley Finill
Yesterday afternoon the Bank of England interest rate decision finally came as they cut interest rates by 0.25% to 5%. On the weeks leading up to the decision, it was thought that the BoE would not cut and for rates to remain the same, as inflation in the UK remained at 2% from the following month’s figure. However, the monetary policy committee voted 5 to 4 in favour for a rate cut. After the announcement was made there were no initial shockwaves on the currency market as a cut had seemingly already been priced in and this is probably right, as a number of mortgage lenders has slashed rates ahead of the decision. Sterling started to feel pressure over the past week as we saw on Friday afternoon of last week when the Pound lost over half a cent on the Euro and a cent and a half on the US Dollar. At the time of writing this morning, Sterling has continued to drop against the Euro, and following the decision has seen over half a cent lost already with GBP/EUR now being down over a cent from this time last week. An interest rate cut in the UK was an inevitability at some point and with it, comes sterling weakness with this the start of likely future cuts throughout the next couple of years, which does not bode well for Sterling. The Pound has been buoyant over the past couple of years which had been massively aided by interest rate hikes coupled with the ECB cutting rates first but now the BoE has taken the plunge to cut Sterling has started to show its frailties once again.
Forward Contracts
With the key interest rate decision now likely to dictate Sterling’s performance on the currency market, our popular forward contract option could be of interest due to its ability of securing a rate for future settlement with only a 10% deposit, giving you peace of mind in knowing you’re within your budget, and crucially removing the risk of the market going against you during the time before the completion on your property. With the recent drop against the Euro for example a property costing €150k this time last week is already £1k more expensive and with interest rates only to come down for the foreseeable Sterling could continue to suffer which. A forward contract is a great way to take the risk and anxiety away from rising costs by securing all your currency with just a 10% deposit.
Data remaining this week
As we come to the last working day of the week there are still a few data releases, mainly from the US, which are likely to cause volatility in today’s trading. At 2.30pm, Nonfarm pay rolls is to posted, the figure is expected to contract to 175K from last months reading of 206K, this announcement usually has an affect on the currency market so should you have a US Dollar requirement today it may be worth getting in contact with you account manager to get your currency in place should you want to remove the risk of any potential movement against you.